ACIT, Rewari v. The Mahendergarh Central Co-op Bank Ltd., Haryana

ITA 4311/DEL/2011 | 2008-2009
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 431120114 RSA 2011
Assessee PAN AAAAT9320K
Bench Delhi
Appeal Number ITA 4311/DEL/2011
Duration Of Justice 6 month(s)
Appellant ACIT, Rewari
Respondent The Mahendergarh Central Co-op Bank Ltd., Haryana
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 30-03-2012
Date Of Final Hearing 26-03-2012
Next Hearing Date 26-03-2012
Assessment Year 2008-2009
Appeal Filed On 29-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI H BENC H BEFORE SHRI A.N. PAHUJA AM AND SHRI C.M. GARG J M ITA NO.4311/D EL. /2011 ASSESSMENT YEAR : 2008-09 ACIT REWARI CIRCLE AAYAKAR BHAWAN MODEL TOWN REWARI V/S . THE MAHENDERGARH CENTRAL CO-OP BANK LTD. RAILWAY ROAD MAHENDERGARH [PAN: AAAAT 9320 K] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SANJEEV JAIN AR REVENUE BY MRS. RENA S. PURI DR DATE OF HEARING 29-03-2012 DATE OF PRONOUNCEMENT 30 -03-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 29.9.2011 BY THE REVENUE AGAI NST AN ORDER DATED 19.07.2011 OF THE CIT(A)-ROHTAK RAISES THE F OLLOWING GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO AMOU NTING TO ` ` 61 850/- ON ACCOUNT OF ARREARS OF PAY WHICH PERTAINS TO THE PERIOD PRIOR TO THE YEAR UNDER CONSIDERATION. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO AMOU NTING TO ` `11 41 000/- ON ACCOUNT OF FICTITIOUS UNSECURED LOA N HELD AS UNEXPLAINED LIABILITY. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FACTS IN BRIEF AS PER RELEVANT ORDER ARE THAT RETURN DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S 80P OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERR ED TO AS THE ACT) FILED ON 30 TH SEPTEMBER 2008 BY THE ASSESSEE A CO-OPERATIVE BAN K WAS REVISED ON 12 TH FEBRUARY 2009 DISCLOSING INCOME OF ` ` 40 74 940/-. THE RETURN WAS REVISED DUE TO WITHDRAWAL OF CLAIM FOR DEDUCTION U/S 80P OF THE ACT THE PROVISIONS HAVING BEEN AMENDED W.E.F. AY 2007-08. SUBSEQUENTLY THE RETURN WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 23.09.2009. ITA NO.4311/DEL./2011 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER (A.O. IN SHORT) NOTICED THAT AN AMOUNT OF ` ` 61 850/- WAS PAID BY THE BANK TOWARDS ARREARS OF PAY TO ITS EMPLOYEES. SINCE THE ARREARS OF PAY PERTAINED TO THE PRIOR PERIOD THE AO SHOWCAUSED THE ASSESSEE AS TO WHY THE AMOUNT BE NOT DISALLOWED. IN RESPONSE THE ASSESSEE REPLIED THAT ARREARS WERE PA ID TO THE EMPLOYEES ONLY AFTER RESOLUTION OF BOARD OF DIRECTORS OF THE BANK PASSED IN A MEETING IN THE YEAR UNDER CONSIDERATION. HOWEVER THE AO DID NOT ACCEP T THE SUBMISSIONS OF THE ASSESSEE AND ADDED THE AMOUNT OF ` `61 850/-ON THE GROUND THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND A FORESAID EXPENSES COULD HAVE BEEN PROVIDED IN THE YEAR OF THEIR ACCRUAL. 3. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE IN THE FOLLOWING TERMS:- 4.1 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSION S MADE BY THE AR. THE LIMITED QUESTION HERE IS WHETHER THE A PPELLANT COULD HAVE MADE APPROPRIATE PROVISION IN RESPECT OF THE A BOVE EXPENDITURE AND CLAIMED IN THE RELEVANT YEAR. FROM THE FACTS AS BROUGHT OUT BY THE AR IT IS NOTED THAT PASSING OF SUCH EXPENDITURE BY THE BOARD OF DIRECTORS IS NOT A ROUTINE MATTER A ND IT IS CONTINGENT ON VARIOUS FACTORS LIKE THE PROFITABILITY ETC. WHE N THE LIABILITY IS CONTINGENT THE APPELLANT COULD NOT HAVE MADE APPRO PRIATE PROVISION FOR THE RELEVANT YEAR AND THE EXPENDITURE WAS CLAIMED AS AND WHEN IT WAS APPROVED BY THE BOARD OF DIRECTORS. THEREFORE THIS AMOUNT IS ALLOWABLE IN THE YEAR OF PASSING BY THE BOARD OF DIRECTORS AND THUS THE ADDITION MADE BY THE ASSESSI NG OFFICER IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY ARREARS OF PAY WERE PAID TO TH E EMPLOYEES IN CONSONANCE WITH RESOLUTION OF BOARD OF DIRECTORS OF THE ASSESS EE COMPANY PASSED IN A MEETING THE YEAR UNDER CONSIDERATION. ADMITTEDLY THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT IS WELL SETTLED THAT ACCRUAL OF A STATUTORY ITA NO.4311/DEL./2011 3 LIABILITY DEPENDS UPON THE TERMS OF THE RELEVANT S TATUTE. THE QUANTIFICATION OR ASCERTAINMENT CANNOT POSTPONE ITS ACCRUAL TO THE EX TENT OF ADMITTED LIABILITY. ON THE OTHER HAND CONTRACTUAL LIABILITY ACCRUES WHEN THE BASIS FOR ITS QUANTIFICATION IS SETTLED BY AN AGREEMENT OR OTHERWISE. AS HELD BY TH E HONBLE GUJRAT HIGH COURT IN THEIR DECISION IN SAURASHTRA CEMENT & CHEMICAL I NDUSTRIES LTD. VS. CIT 213 ITR 523(GUJ) MERELY BECAUSE AN EXPENSE RELATES TO A TRANSACTION OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS DETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS OF MAINTAINING ACCOUNTS ON THE MERCANTILE BAS IS. IN EACH CASE WHERE THE ACCOUNTS ARE MAINTAINED ON THE MERCANTILE BASIS IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM WHETHER SUCH LIABILITY WAS CRYSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEAR SO AS TO BE REQUIRED TO BE ADJUSTED I N THE BOOKS OF ACCOUNT OF THAT PREVIOUS YEAR. IF ANY LIABILITY THOUGH RELATING TO THE EARLIER YEAR DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIMED AND PAID IN THE LATER PREVIOU S YEAR IT CANNOT BE DISALLOWED AS DEDUCTION MERELY ON THE BASIS THE ACCOUNTS ARE M AINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTION OF THE P REVIOUS YEAR THE HONBLE HIGH COURT OBSERVED. IT WAS FURTHER CONCLUDED THAT IT I S ACTUALLY KNOWN INCOME OR EXPENSES THE RIGHT TO RECEIVE OR THE LIABILITY TO PAY WHICH HAS COME TO BE CRYSTALLIZED WHICH IS TO BE TAKEN INTO ACCOUNT UND ER THE MERCANTILE SYSTEM OF MAINTAINING BOOKS OF ACCOUNT. AN ESTIMATED INCOME O R LIABILITY WHICH IS YET TO BE CRYSTALLIZED CAN ONLY BE ADJUSTED AS A CONTINGENCY ITEM BUT NOT AS AN ACCRUED INCOME OR LIABILITY OF THAT YEAR. IN VIEW OF THE FOREGOING AND IN THE LIGHT OF VIEW TAKEN BY THE HONBLE GUJRAT HIGH COURT IN THE AFORE CITED DECISION SINCE THE LIABILITY TOWARDS ARREARS OF PAY CRYSTALLIZED IN TH E YEAR UNDER CONSIDERATION ON PASSING OF RESOLUTION BY THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY APPARENTLY AMOUNT WAS ALLOWABLE IN THIS YEAR ALONE. SINCE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING T HE AFORESAID FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) WE ARE NOT INCLINED TO INTERFERE. THEREFORE GROUND NO.1 IN THE APPEAL IS DISMISSED. ITA NO.4311/DEL./2011 4 6. GROUND NO.2 IN THE APPEAL RELATES TO ADDITION O F ` ` 11 41 000/- ON ACCOUNT OF FICTITIOUS LIABILITY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE GOVERNMENT AUDITORS IN THEIR RE PORT POINTED OUT THAT THE BANK CLAIMED FICTITIOUS LIABILITY BY WAY OF SUNDRY CREDI TORS AMOUNTING TO ` ` 11 41 000/-. TO A QUERY BY THE AO THE ASSESSEE REPLIED THAT THE SE WERE MERELY VIEWS OF THE AUDITORS AND THE AMOUNT COMPRISED SUBSIDY GRANT IN OPERATIVE BANK ACCOUNTS AND OTHER BANKING TRANSACTIONS. THE ASSESSEE PLEAD ED THAT THE AMOUNT BELONGED TO THE PERSONS WHO WERE IDENTIFIABLE AND B ANK HAD TO PAY THE AMOUNT. HOWEVER THE AO DID NOT ACCEPT THE SUBMISSIONS OF T HE BANK IN THE LIGHT OF OBSERVATIONS OF THE GOVERNMENT AUDITORS AND ACCORDI NGLY ADDED THE AMOUNT OF ` `11 41 000/- AS AN UNEXPLAINED LIABILITY. 7. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE IN THE FOLLOWING TERMS:- 5.2 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIO NS MADE BY THE AR. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS MERELY RELIED UPON THE REPORT OF THE CO -OP SOCIETIES AUDITOR WITHOUT GETTING INTO THE FACTS OF THE ISSUE . AS EXPLAINED BY THE AR THE OUTSTANDING LIABILITY IS ON ACCOUNT OF SUBSIDY/GRANT OF THE GOVT. TO BE CREDITED TO THE BORROWERS A/C BALA NCES OF IN- OPERATIVE ACCOUNTS ETC. THE PERSONS TO WHOM THE SA ID AMOUNTS HAVE TO BE PAID AFTER THE STIPULATED PERIOD AS PER THE POLICY OF THE GOVT. ARE IDENTIFIED. IN RESPECT OF THE IN-OPERATI VE ACCOUNTS THE BALANCES HAVE TO BE ULTIMATELY TRANSFERRED TO RBI. THIS BEING THE CASE THE SAID LIABILITY CAN NOT BE CONSIDERED AS F ICTITIOUS NOT LIABLE TO BE DISCHARGED. THEREFORE THE ADDITION MADE BY THE AO IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR MERELY SUPPOR TED THE ORDER OF AO WHILE CONTENDING THAT THE GOVERNMENT AUDITORS FOUND THE L IABILITY FICTITIOUS WHILE THERE IS NOTHING IN THE IMPUGNED ORDER ABOUT THE NATURE OF L IABILITY.. TO A QUERY BY THE BENCH NEITHER THE LD. DR NOR THE LD. AR ON BEHALF OF THE ASSESSEE PLACED BEFORE US THE BREAK UP OF THE AMOUNT OR ANY DETAILS EVID ENCING THE NATURE OF LIABILITY COMPRISING THE AMOUNT OF ` `11 41 000/-. AFTER DISCUSSION BOTH THE PARTIES ITA NO.4311/DEL./2011 5 AGREED THAT SINCE THE RELEVANT FACTS ARE NOT BROUGH T OUT IN THE IMPUGNED ORDER MATTER REQUIRES RE-ADJUDICATION BY THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SINCE THE DETAILED BREAK UP OF AMOUNT OF ` `11 41 000/- HAS NOT BEEN PLACED BEFORE US NOR THE RELEVANT DETAILS EVIDENC ING THE NATURE OF LIABILITY COMPRISED IN THE AFORESAID ACCOUNT WE FIND SUFFICI ENT MERIT IN THE CONTENTIONS OF THE LD. DR AND ACCORDINGLY CONSIDER IT FAIR AND AP PROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS F ILE FOR DECIDING THE ISSUE RAISED IN THE GROUND NO.2 IN THE APPEAL AFRESH IN ACCOR DANCE WITH LAW AFTER ANALYZING THE NATURE OF EACH OF THE LIABILITY COMP RISED IN THE AFORESAID AMOUNT AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNIT Y TO BOTH THE PARTIES BRINGING OUT CLEARLY AS TO WHETHER OR NOT LIABILITY IS ACTUA LLY FICTITIOUS . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A) SHA LL PASS A SPEAKING ORDER AS TO WHETHER OR NOT THE SAID AMOUNT CAN BE BROUGHT TO TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WITH THESE OBSERVATIONS GROUND NO.2 IN THE APPEA L IS DISPOSED OF. 10. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE U S. 11. IN RESULT THE APPEAL IS PARTLY ALLOWED BUT FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.M. GARG) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO :- 1. THE MAHENDERGARH CENTRAL CO-OP BANK LTD. RAILW AY ROAD MAHENDERGARH 2. ACIT REWARI CIRCLE AAYAKAR BHAWAN MODEL TOWN RE WARI ITA NO.4311/DEL./2011 6 3. CIT CONCERNED. 4. CIT(A)-ROHTAK. 5. THE DR ITAT H BENCH NEW DELHI 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI